The more companies I work with, the more I find myself giving the same advice. It starts out with something like “I really like this product, but…” and it always ends the same way:
CHARGE MORE MONEY!
So far, a few companies have even taken our advice on this, and guess what? It’s worked out pretty well! They’ve focused more clearly on delivering customer value, they’re able to learn a lot from close working relationships with early customers, and they’re not committed to a higher price point forever.
Let’s take a look at each of these advantages in turn.*
*Note: this blog post was inspired by this tweet from John Sheehan, CEO and Co-Founder of Runscope:
My next SaaS will start at $999/month.
— John Sheehan (@johnsheehan) February 15, 2017
Focus, focus, focus
Charging $999/month has a positive psychological impact on both the people selling the product, and the people buying it. From the point of view of founders and product people at SaaS companies, setting the bar high with a $999/month price point, for instance, makes it easier for everyone to rally around the most important aspect of making and selling software: delivering customer value.
Suddenly, product decisions become easier. Focusing on the personas of the actual individuals at companies who are going to buy your software also becomes a lot more serious and important when they’re going to pay you more than $10,000/year. You’re no longer “just another piece of software,” you’re actually going to be a part of a team discussion. Maybe even a purchase order. Maybe even some lawyers will be involved. This is good, trust me.
Good feedback from real stakeholders
Selling your SaaS product at a higher price point means that your customers, especially early customers, are going to be your partners. You need to choose them wisely, and they need to trust you. You will be growing the product just enough to suit their needs without going against your core mission.
Yes, this is more challenging! It’s a lot harder to listen to customers, to sift through their feedback, and to wisely choose what to respond to than it is to have the “we’re going to have 10,000 customers anyway, so we can’t listen to just a few” attitude. But it’s worth it. You’ll build trust, earn a reputation, and solve real problems. You can always try to have thousands of customers later, if you decide you need to.
You’re not committed forever
Starting out with a product that is $999/month doesn’t mean you can’t ever have a $499/month offering, or even a $99/month offering, down the road. Starting with $999/month means that you’re committed to solving a key problem, and the stakes being higher means that you’ll have to work harder to get there. But along the way, you may unlock easier to sell, less-involved product lines to offer to potential customers. You may discover the key to serving thousands of customers without suffering a massive support burden. There are a lot of possibilities.
Starting out at $99/month and going upmarket to $999/month is possible too, it’s just trickier. You’ve got a lot of customers to deal with, if you’re successful. You’re doing the right thing by making the move to a price point that is more sustainable and takes fewer moving parts to support, but being that far down the path means you’ve got a lot of commitments to fulfill.
Yes, I’m biased
“But what about self-service? Mass adoption? Riches and billions and everyone being our customer?”
Yeah, about that. I think that aiming for mass adoption before you know that you can get real customers to cough up real money to solve real problems can get in the way of your success. Self-service and thousands of customers is a nice long-term goal, but seriously — why invite the headaches if you don’t need them?
Clearly, I’m biased toward smaller companies which can sell less software to fewer companies for more money. I think it’s more realistic, I think it’s more sustainable, and I think it will make for a software ecosystem in the long run that is more humane and sustainable.
What are your thoughts? Get into the discussion on Market News!